Financial Marketing and the Moral Compass

The issue of whether marketing professionals should work with clients in controversial areas of business is certainly not new. Alcohol, tobacco, gambling and pornography have fitted the 'usual suspects' bill for long enough.

Increasingly, however, in the wake of the recent financial meltdown across Europe, we're seeing a new contender in the unpopularity stakes. You've probably noticed a new breed of financial services company that's emerged recently in the UK - and they don't enjoy a very good press.

Yes, we're talking about online companies that charge thumping rates of interest for the privilege of borrowing relatively small amounts of cash for just a few weeks or months. They've even devised innocuous-sounding names for their services such as Payday Loans or Logbook Loans.

The fact is, these are serious money-making machines that many people feel are on the very edge of what is acceptable in lending to vulnerable people at annual percentage interest rates (APRs) that can run as high as 4,000 per cent or more.

The mainstream lenders have 'done a runner' and what little lending they do is often on a 'fair weather friend' basis. In other words, they'll only lend you an umbrella when the sun is shining.

On this basis, it's true that the 'new lenders' are performing a public service, but where else can the public go when their finances are tight, maybe someone in the family has lost his job, and they're confronted with a financial emergency such as a broken TV or washing machine, dental bills or a leaking roof.

Is it ethical business?

One of the ethical dilemmas that surround this burgeoning 'industry' is whether marketing professionals should encourage the success of Payday Loan-type companies at the expense of their often-vulnerable customers.

Those marketing people - and their financial copywriters who get down and dirty with the business of persuasion - who don't have a conscience about working in such controversial areas, have a simple argument.

Given that there's a demand for their clients' financial products and services, they would say, what's wrong with earning an honest living from servicing that market? Anyone who doesn't approve of such opportunistic businesses has the freedom to say 'No, it's not for me.'

The question is, although the vast majority of these companies are regulated in the UK by the Office of Fair Trading, and although the Payday Loans concept was approved in principle as providing a valid public service, is it the case that the economic environment has changed to such an extent that there are now far too many vulnerable people out there on which the online lenders can prey?

When a slick, amusing ad comes on the TV with contented so-called customers extolling the virtues of the various types of online loans available ("I got my cash in minutes - and no awkward questions either!"), anyone who's in a financial fix would be tempted.

Marketing people are in collusion with the illusion that this is all a massively enlightened way to solve cash-flow problems. Whichever way you look at it, there has to be a severe disconnect between income and expenditure as Scrooge so wisely noted. Unfortunately, debt of this type isn't just for Christmas.

With sky-high interest rates, and debt agreements that can be 'rolled over' or carried forward in the shape of a new loan, the world of 'jam tomorrow' can rapidly become a personal log-jam, with all the potential risks it carries for an individual's long-term credit status.